# How Can an Owner's Discretion Clause Be Challenged in an Rfp Dispute? ▴ Question

**Published:** 2025-08-10
**Categories:** Question

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## Concept

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## The Illusion of Absolute Power in Procurement

An owner’s [discretion clause](https://prime.greeks.live/question/what-is-the-difference-between-a-privilege-clause-and-a-discretion-clause-in-an-rfp/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) within a Request for Proposal (RFP) often appears to be an impenetrable shield, granting the issuing entity the unilateral power to select a vendor based on its own judgment. This perception, however, belies a more complex reality governed by legal and ethical frameworks. The core of the issue resides in the tension between the explicit language of the contract and the implicit duties that courts have consistently upheld.

An owner’s discretionary power is rarely absolute; it is almost always tempered by the implied covenant of [good faith](https://prime.greeks.live/area/good-faith/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and [fair dealing](https://prime.greeks.live/area/fair-dealing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This covenant acts as a foundational principle, ensuring that a party with discretionary power does not exercise it in a manner that is arbitrary, capricious, or designed to undermine the legitimate expectations of the bidders.

The nature of the owner ▴ whether a public entity or a private corporation ▴ profoundly alters the landscape of a potential dispute. Public entities are typically bound by statutes and regulations designed to ensure fairness and protect public funds. Consequently, their discretion is significantly more constrained, often tied to the concept of selecting the “[lowest responsible bidder](https://prime.greeks.live/area/lowest-responsible-bidder/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).” This standard requires a demonstrable, [rational basis](https://prime.greeks.live/question/can-the-hedging-activities-of-an-xva-desk-introduce-new-unintended-basis-risks-to-the-firm/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) for the decision, moving beyond mere price to include factors like a bidder’s qualifications, experience, and financial stability.

A challenge in the public sector, therefore, often centers on whether the evaluation process was a genuine assessment of responsibility or a pretext for a predetermined outcome. Proving favoritism, corruption, or a complete lack of a rational basis for the decision becomes the primary objective for a disappointed bidder.

In the private sector, the latitude is greater, but the principle of good faith remains a potent check on discretionary authority. While a private company is not usually required to award a contract to the lowest bidder, its decisions are still subject to the terms of the RFP and the overarching duty of fair dealing. A challenge in this context may focus on demonstrating that the owner’s exercise of discretion was not for any legitimate business purpose, but rather was motivated by [bad faith](https://prime.greeks.live/area/bad-faith/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) or an ulterior motive unrelated to the project’s objectives. The central question becomes whether the owner’s decision, while seemingly protected by the discretion clause, effectively nullified the promises and expectations established by the RFP process itself.

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## Strategy

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## Deconstructing Discretionary Authority

Challenging an owner’s discretion clause requires a multi-pronged strategy that moves from a broad examination of the contractual relationship to a granular analysis of the decision-making process. The initial step involves a thorough legal and factual investigation to identify the most viable avenues for a challenge. This process is not about a frontal assault on the clause itself, but rather about demonstrating that the exercise of the discretion granted by the clause was legally deficient.

> A successful challenge hinges on transforming a subjective decision into an objective case of procedural or ethical failure.

The strategic approach can be broken down into several key phases, each with its own set of objectives and tactics. The first phase is a comprehensive document review, focusing on the RFP, all submitted proposals, correspondence between the parties, and any internal documents of the owner that may be obtained through discovery. The goal is to build a detailed timeline and identify any inconsistencies or procedural irregularities. The second phase involves identifying the appropriate [legal theory](https://prime.greeks.live/question/what-is-the-game-theory-behind-a-dealers-decision-to-respond-to-an-rfq/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) of the case, which will typically fall into one of three categories ▴ breach of the implied covenant of good faith and fair dealing, violation of public procurement statutes (for [public contracts](https://prime.greeks.live/area/public-contracts/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)), or promissory estoppel, where the bidder can show it reasonably relied on the owner’s promises in the RFP to its detriment.

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## Frameworks for Contesting the Decision

The selection of a legal framework is critical and will dictate the evidence required and the arguments to be made. The two most common frameworks are outlined below.

- **The Good Faith and Fair Dealing Argument** ▴ This is the most universally applicable strategy. It does not argue that the owner lacks discretion, but that the discretion was exercised in bad faith. Evidence for this can include demonstrating that the owner failed to consider the merits of the proposals, applied unstated evaluation criteria, engaged in self-dealing, or acted with a motive to harm the bidder. This approach is particularly effective when the owner’s conduct appears arbitrary or irrational.

- **The [Procedural Defect](https://prime.greeks.live/area/procedural-defect/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) Argument** ▴ This strategy is most potent in the context of public contracts but can also apply to private RFPs with detailed procedural rules. The focus here is on proving that the owner failed to follow its own rules as laid out in the RFP. This could involve showing that the scoring was manipulated, that the evaluation panel was biased, or that the owner engaged in improper communications with the winning bidder. A key tactic in this approach is to depose the members of the evaluation panel and scrutinize their scoring matrices and notes for any signs of impropriety.

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## Comparative Legal Theories for a Challenge

The choice of legal theory will have significant implications for the discovery process and the presentation of the case. The following table compares the key elements of the most common legal theories used to challenge an owner’s discretion clause.

| Legal Theory | Core Allegation | Key Evidence | Primary Application |
| --- | --- | --- | --- |
| Breach of Implied Covenant of Good Faith and Fair Dealing | The owner exercised its discretion for an improper purpose or with a dishonest motive. | Emails showing bias, evidence of conflicts of interest, lack of a rational basis for the decision, actions contrary to the bidder’s reasonable expectations. | Both public and private sector RFP disputes. |
| Violation of Procurement Statutes | The owner failed to comply with laws governing public contracts, such as awarding to the “lowest responsible bidder.” | The RFP documents, bid submissions, scoring sheets, public records of the decision, statutes and regulations. | Public sector RFP disputes only. |
| Promissory Estoppel | The bidder reasonably relied on the owner’s promises in the RFP and suffered damages as a result of the owner breaking those promises. | The specific language of the RFP, evidence of the bidder’s expenses in preparing the proposal, proof that the owner’s actions contradicted the RFP’s terms. | Primarily private sector, but can apply in some public contexts. |

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## Execution

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## The Mechanics of Mounting a Challenge

Executing a successful challenge to an owner’s discretion clause requires a disciplined and methodical approach. Once the strategic framework has been established, the focus shifts to the tactical implementation of the legal plan. This phase is data-intensive and relies on the systematic gathering and analysis of evidence to build a compelling narrative of impropriety.

The first step in the execution phase is typically the dispatch of a formal notice of dispute or a [bid protest](https://prime.greeks.live/area/bid-protest/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) letter. This document should be carefully drafted to outline the grounds for the challenge, citing the specific provisions of the RFP and any relevant legal principles that are alleged to have been violated. It should also request the preservation of all documents related to the procurement process.

Following this initial notice, the process of formal discovery begins. This is the most critical part of the execution phase, as it is where the evidence needed to prove the case will be uncovered.

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## Discovery and Evidence Compilation

The discovery process is a structured legal procedure for obtaining information from the other party. It can involve several methods, each designed to elicit different types of information.

- **Document Requests** ▴ This involves formally requesting all documents related to the RFP, including all proposals, scoring sheets, evaluator notes, internal memos, and all correspondence between the owner and the winning bidder. The goal is to reconstruct the decision-making process and identify any anomalies.

- **Interrogatories** ▴ These are written questions sent to the owner, which must be answered under oath. They are used to obtain specific factual information, such as the identities of all individuals involved in the evaluation, the specific criteria used, and the rationale for the final decision.

- **Depositions** ▴ This is the oral testimony of witnesses, taken under oath. Depositions of the evaluation committee members are particularly crucial. The objective is to question them on their evaluation process, their scoring, and any potential biases or preconceived notions they may have had. This is often where evidence of favoritism or a flawed process comes to light.

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## Evidentiary Thresholds for a Successful Challenge

The type and quality of evidence required will vary depending on the legal theory of the case. The following table outlines the evidentiary thresholds for common grounds of challenge.

| Grounds for Challenge | Evidentiary Threshold | Examples of Supporting Evidence |
| --- | --- | --- |
| Arbitrary and Capricious Decision | Evidence that the decision lacks any rational basis. | Scoring sheets that are inconsistent with the proposals, a decision that ignores significant advantages of the losing bid, a complete failure to follow the stated evaluation criteria. |
| Bad Faith or Ulterior Motive | Proof that the owner acted with a dishonest purpose. | Emails indicating a preference for one bidder before the evaluation was complete, evidence of a conflict of interest, proof that the owner’s stated reasons for the decision are false. |
| Failure to Follow Process | Demonstration that the owner violated the procedural rules set out in the RFP. | Proof of improper communication with a bidder, evidence that not all evaluators reviewed all proposals, documentation that the scoring was changed after the initial evaluation. |

> A challenge is won not by arguing about the outcome, but by proving the illegitimacy of the process that produced it.

Ultimately, the execution of a challenge to an owner’s discretion clause is about meticulously building a case, piece by piece, through the careful collection and analysis of evidence. It is a process that demands precision, persistence, and a deep understanding of both the contractual and legal principles at play. The goal is to move the dispute from the realm of the owner’s subjective discretion into the objective world of provable facts and legal standards.

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## References

- Orenstein, Scott S. “Public Owners Have Substantial Discretion in Determining the Lowest Responsible Bidder.” Construction Law & Litigation, 2014.

- Pollock, Ronald H. “The Problem with Sole Discretion Clauses in Construction Contracts.” Saxton & Stump, 2019.

- Whittle, Corinna. “Facts of case mean court uses discretion on ADR clause.” TLT LLP, 2025.

- “Contractual discretion and its limits.” Norton Rose Fulbright.

- Good Earth Tree Care, Inc. v. Town of Fairfield, 2014 WL 3408914 (Conn.App.), 2 (Conn.App. 2014).

- Ohpen Operations UK Ltd v Invesco Fund Managers Ltd EWHC 2246 (TCC).

- Kajima Construction Europe (UK) Ltd v Children’s Ark Partnership Ltd EWCA Civ 292.

- Abu Dhabi National Tanker Co v Product Star Shipping Ltd (The “Product Star”) 1 Lloyd’s LR 397.

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## Reflection

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## Beyond the Clause a Framework of Integrity

The examination of an owner’s discretion clause reveals a fundamental truth about commercial relationships ▴ the written word is always interpreted within a broader context of ethical and legal expectations. The power granted by a contract is rarely absolute, and its exercise is subject to scrutiny. Understanding the legal avenues for a challenge is a valuable tool for any organization that participates in competitive procurement processes. It transforms the RFP from a simple submission of a proposal into a more dynamic interaction where all parties are held to a standard of fairness.

This knowledge provides a strategic advantage, allowing a bidder to assess the fairness of a procurement process in real-time and to identify the red flags of a potentially flawed selection. It also fosters a more disciplined approach to the bidding process itself, encouraging a focus on clear communication, thorough documentation, and a comprehensive understanding of the owner’s stated objectives. Ultimately, the ability to challenge an owner’s discretion is not just about recourse in the event of a dispute; it is about promoting a more transparent and equitable procurement landscape for all participants.

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## Glossary

<a href="https://prime.greeks.live/question/what-is-the-difference-between-a-privilege-clause-and-a-discretion-clause-in-an-rfp/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Discretion Clause

A privilege clause reserves the right to select a compliant bid based on value over price; a discretion clause permits waiving minor defects in bids. </a><a href="https://prime.greeks.live/area/fair-dealing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Fair Dealing

Meaning ▴ Fair Dealing denotes the fundamental principle of equitable and non-discriminatory treatment afforded to all market participants within a trading system, ensuring that institutional order flow is processed without bias or preferential access. </a><a href="https://prime.greeks.live/area/good-faith/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Good Faith

Meaning ▴ Good Faith, in a financial and operational context, denotes the adherence to honest intent and absence of fraudulent or deceptive conduct during contractual agreements and transactional processes. </a><a href="https://prime.greeks.live/area/lowest-responsible-bidder/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central illuminated hub with four light beams forming an 'X' against dark geometric planes. This embodies a Prime RFQ orchestrating multi-leg spread execution, aggregating RFQ liquidity across diverse venues for optimal price discovery and high-fidelity execution of institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-orchestrating-high-fidelity-execution-and-optimal-price-discovery.jpg)

## Lowest Responsible Bidder

Meaning ▴ The Lowest Responsible Bidder identifies the most favorable price submitted by a counterparty that demonstrably satisfies a pre-established framework of stringent operational, financial, and reputational criteria, thereby ensuring execution integrity and systemic stability beyond simple price aggregation within institutional digital asset derivatives markets. </a><a href="https://prime.greeks.live/question/can-the-hedging-activities-of-an-xva-desk-introduce-new-unintended-basis-risks-to-the-firm/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Rational Basis

Yes, by using imperfect or proxy hedges, XVA desks transform counterparty risk into a new, more subtle basis risk. </a><a href="https://prime.greeks.live/area/bad-faith/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central glowing blue mechanism with a precision reticle is encased by dark metallic panels. This symbolizes an institutional-grade Principal's operational framework for high-fidelity execution of digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-core-enabling-institutional-digital-asset-derivatives-rfq-execution.jpg)

## Bad Faith

Meaning ▴ Bad Faith denotes a deliberate action or omission that deviates from established transactional protocols or implied fair dealing, specifically engineered to exploit system vulnerabilities or informational asymmetries for undue advantage within a digital asset trading environment. </a><a href="https://prime.greeks.live/area/public-contracts/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Public Contracts

Meaning ▴ Public Contracts define standardized, transparent agreements or instruments within financial markets, particularly relevant for institutional digital asset derivatives. </a><a href="https://prime.greeks.live/question/what-is-the-game-theory-behind-a-dealers-decision-to-respond-to-an-rfq/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Legal Theory

A dealer's RFQ response is a game-theoretic calculation of information risk, competitive pressure, and inventory optimization. </a><a href="https://prime.greeks.live/area/procedural-defect/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two intersecting technical arms, one opaque metallic and one transparent blue with internal glowing patterns, pivot around a central hub. This symbolizes a Principal's RFQ protocol engine, enabling high-fidelity execution and price discovery for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/principal-grade-digital-asset-derivatives-rfq-execution-engine.jpg)

## Procedural Defect

Meaning ▴ A procedural defect represents a fundamental deviation from the intended operational sequence or logical flow within a financial protocol or system. </a><a href="https://prime.greeks.live/area/bid-protest/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sphere split into light and dark segments, revealing a luminous core. This encapsulates the precise Request for Quote RFQ protocol for institutional digital asset derivatives, highlighting high-fidelity execution, optimal price discovery, and advanced market microstructure within aggregated liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-execution-framework-for-institutional-digital-asset-derivatives-request-for-quote-protocol-optimization.jpg)

## Bid Protest

Meaning ▴ A Bid Protest represents a formal, auditable mechanism within an institutional digital asset derivatives trading framework, enabling a principal to systematically challenge the integrity or outcome of a competitive pricing event. </a>

**Tags:** [Fair Dealing](https://options.greeks.live/area/fair-dealing/), [Contract Law](https://options.greeks.live/area/contract-law/), [Good Faith](https://options.greeks.live/area/good-faith/), [Owner's Discretion Clause](https://options.greeks.live/area/owners-discretion-clause/), [RFP Dispute](https://options.greeks.live/area/rfp-dispute/), [Bid Protest](https://options.greeks.live/area/bid-protest/)	

## Discover More

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### [How Can a Bidder Prove That an Agency Acted in Bad Faith When Cancelling an Rfp?](https://options.greeks.live/question/how-can-a-bidder-prove-that-an-agency-acted-in-bad-faith-when-cancelling-an-rfp/)
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Proving an agency's bad faith in an RFP cancellation requires a bidder to present clear and convincing evidence of an improper motive, thereby overcoming the strong presumption that government officials act in good faith.

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![An institutional-grade platform's RFQ protocol interface, with a price discovery engine and precision guides, enables high-fidelity execution for digital asset derivatives. Integrated controls optimize market microstructure and liquidity aggregation within a Principal's operational framework.](https://options.greeks.live/wp-content/uploads/2025/07/proprietary-institutional-digital-asset-derivatives-rfq-protocol-engine-facilitating-high-fidelity-execution-and-granular-market-microstructure-analysis-for-prime-os.jpg)

Modifying RFP criteria post-deadline compromises the system's integrity, breaching the implied contract of fair dealing with bidders.

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### [What Are the Essential Elements of an Enforceable Privilege Clause in an Rfp?](https://options.greeks.live/question/what-are-the-essential-elements-of-an-enforceable-privilege-clause-in-an-rfp/)
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An enforceable privilege clause is a precisely drafted legal instrument in an RFP that reserves specific, transparent rights for the issuer.

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### [Can a Bidder Recover Proposal Preparation Costs If an RFP Is Improperly Cancelled?](https://options.greeks.live/question/can-a-bidder-recover-proposal-preparation-costs-if-an-rfp-is-improperly-cancelled/)
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A bidder may recover proposal costs if an RFP's improper cancellation breaches the implied contract to evaluate bids fairly.

- 
### [What Are the Legal Consequences of Sharing Information Unequally among Bidders during an RFP Process?](https://options.greeks.live/question/what-are-the-legal-consequences-of-sharing-information-unequally-among-bidders-during-an-rfp-process/)
![A metallic blade signifies high-fidelity execution and smart order routing, piercing a complex Prime RFQ orb. Within, market microstructure, algorithmic trading, and liquidity pools are visualized. Glowing blue pathways represent RFQ protocol and price discovery, ensuring optimized capital efficiency for institutional digital asset derivatives.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-prime-os-execution-precision.jpg)

Unequal information sharing in an RFP breaches the implied contract of fair dealing, creating severe legal and financial liabilities.

- 
### [What Legal Standards Govern the Cancellation of a Public Sector Rfp?](https://options.greeks.live/question/what-legal-standards-govern-the-cancellation-of-a-public-sector-rfp/)
![Abstract forms on dark, a sphere balanced by intersecting planes. This signifies high-fidelity execution for institutional digital asset derivatives, embodying RFQ protocols and price discovery within a Prime RFQ. It represents market microstructure, managing latent liquidity and counterparty risk for block trades.](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-platform-microstructure-execution-prime-os.jpg)

The cancellation of a public sector RFP is governed by a framework of legal standards that balance the government's discretionary authority with its duty of fair dealing to bidders.

- 
### [What Are the Primary Legal Risks Associated with Cancelling an Rfp?](https://options.greeks.live/question/what-are-the-primary-legal-risks-associated-with-cancelling-an-rfp/)
![Abstract geometric forms portray a dark circular digital asset derivative or liquidity pool on a light plane. Sharp lines and a teal surface with a triangular shadow symbolize market microstructure, RFQ protocol execution, and algorithmic trading precision for institutional grade block trades and high-fidelity execution.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-block-execution-microstructure.jpg)

Cancelling an RFP transforms a procedural step into a legal event, risking breach of process contract claims and demanding a defensible rationale.

- 
### [How Can a Contractor Demonstrate Prejudice in a Protest of an Rfp Cancellation?](https://options.greeks.live/question/how-can-a-contractor-demonstrate-prejudice-in-a-protest-of-an-rfp-cancellation/)
![A sleek, light interface, a Principal's Prime RFQ, overlays a dark, intricate market microstructure. This represents institutional-grade digital asset derivatives trading, showcasing high-fidelity execution via RFQ protocols. It signifies optimized liquidity aggregation, algorithmic trading, and capital efficiency for block trades and multi-leg spreads.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-prime-os-execution-system.jpg)

To prove prejudice in an RFP cancellation protest, a contractor must show the agency's reason was a pretext and it had a substantial chance of winning.

- 
### [What Recourse Does a Bidder Have If They Believe an Rfp Was Improperly Cancelled?](https://options.greeks.live/question/what-recourse-does-a-bidder-have-if-they-believe-an-rfp-was-improperly-cancelled/)
![A meticulously engineered mechanism showcases a blue and grey striped block, representing a structured digital asset derivative, precisely engaged by a metallic tool. This setup illustrates high-fidelity execution within a controlled RFQ environment, optimizing block trade settlement and managing counterparty risk through robust market microstructure. It highlights a Prime RFQ intelligence layer.](https://options.greeks.live/wp-content/uploads/2025/08/precision-engineered-institutional-digital-asset-derivatives-rfq-execution.jpg)

A bidder's recourse for an improper RFP cancellation is a structured challenge to the procuring entity's decision-making process.

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---

**Original URL:** https://options.greeks.live/question/how-can-an-owners-discretion-clause-be-challenged-in-an-rfp-dispute/
